Xenia Hotels & Resorts Inc.
10/31/2025 | Press release | Distributed by Public on 10/31/2025 14:23
Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)
Management's Discussion and Analysis of Financial Condition and Results of Operations
Certain statements in this Quarterly Report on Form 10-Q, other than purely historical information, are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). These statements include statements about Xenia's plans, objectives, strategies, financial performance and outlook, trends, the amount and timing of future cash distributions, prospects or future events and involve known and unknown risks that are difficult to predict. As a result, our actual financial results, performance, achievements or prospects may differ materially from those expressed or implied by these forward-looking statements. In some cases, you can identify forward-looking statements by the use of words such as "may," "could," "expect," "intend," "plan," "seek," "anticipate," "believe," "estimate," "guidance," "predict," "potential," "continue," "likely," "will," "would," "illustrative" and variations of these terms and similar expressions, or the negative of these terms or similar expressions. Such forward-looking statements are necessarily based upon estimates and assumptions that, while considered reasonable by Xenia and its management based on their knowledge and understanding of the business and industry, are inherently uncertain. These statements are not guarantees of future performance, and stockholders should not place undue reliance on forward-looking statements. Forward-looking statements in this Form 10-Q include, among others, statements about our plans, strategies and the impact of macroeconomic factors, including inflation, changing interest rates, a potential domestic and/or global recession, global conflicts, trade disputes, consumer confidence levels in the economy, the evolving workforce and wage landscape, capital expenditures, the ability to consummate acquisitions and dispositions of hotel properties, changes in the geographic markets where our revenues are concentrated, insurance recoveries, liquidity and derivations thereof, financial performance and potential dividends, prospects or future events. There are a number of risks, uncertainties and other important factors, many of which are beyond our control, that could cause our actual results to differ materially from the forward-looking statements contained in this Quarterly Report on Form 10-Q. Such risks, uncertainties and other important factors include, among others: the risk factors set forth under "Part I-Item 1A. Risk Factors" and "Part II-Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (the "SEC") on February 25, 2025, as may be updated elsewhere in this report and the information set forth in other Quarterly Reports on Form 10-Q and Current Reports on Form 8-K that we have filed or will file with the SEC; general economic uncertainty and a contraction in the U.S. or global economy or low levels of economic growth; macroeconomic factors and other factors beyond our control that can adversely affect and reduce demand for hotel rooms, food and beverage services, and/or meeting facilities; inflation which increases our labor and other costs of providing services to guests and meeting hotel brand standards as well as costs related to construction and other capital expenditures including increased costs due to the imposition of tariffs on imported goods, property and other taxes, and insurance which could result in reduced operating profit margins; the impact of supply chain disruptions on our ability to source furniture, fixtures, and equipment required to comply with brand standards and guest expectations and the ability of our third-party managers to source supplies and other items required for operations; our ability to comply with contractual covenants; business, financial and operating risks inherent to real estate investments and the lodging industry; seasonal and cyclical volatility in the lodging industry; adverse changes in specialized industries, such as the energy, technology and/or tourism industries that result in a sustained downturn of related businesses and corporate spending that may negatively impact our revenues and results of operations; levels of spending in transient or group business and leisure segments as well as consumer confidence; declines in occupancy and average daily rate; decreased business travel for in-person meetings due to technological advancements in virtual meetings and/or changes in guest and consumer preferences, including consideration of the impact of travel on the environment; fluctuations in the supply of hotels, due to hotel construction and/or renovation and expansion of existing hotels, and demand for hotel rooms; changes in the competitive environment in the lodging industry, including due to consolidation of management companies, franchisors and online travel agencies, and changes in the markets where we own hotels; events beyond our control, such as wars, global conflicts and geopolitical unrest, changes in trade policy, other political conditions or uncertainty, actual or threatened terrorist or cyber-attacks, mass casualty events, government shutdowns and closures, travel-related health concerns, global outbreaks of pandemics (such as the COVID-19 pandemic) or contagious diseases, or fear of such outbreaks, weather and climate-related events, such as hurricanes, tornadoes, floods, wildfires, and droughts, and natural or man-made disasters; cyber incidents and information technology failures, including unauthorized access to our computer systems and/or our vendors' computer systems, and our third-party management companies' or franchisors' computer systems and/or their vendors' computer systems; changes in interest rates and operating costs, including labor and service related costs; our inability to directly operate our properties and reliance on third-party hotel management companies to operate and manage our hotels; our ability to maintain good relationships with our third-party hotel management companies and franchisors; our failure to maintain and/or comply with required brand operating standards; our ability to maintain our brand licenses at our hotels; relationships with labor unions and changes in labor laws, including increases to minimum wages; retention and attraction of our senior management team or key personnel; our ability to identify and consummate additional acquisitions and dispositions of hotels; our ability to integrate and successfully operate any hotel properties that we acquire in the future and the risks associated with these hotel properties; disruption resulting from the impact of hotel renovations, repositionings, redevelopments and re-branding activities; our ability to access capital for renovations, acquisitions and general operating needs on terms and at times that are acceptable to us; the fixed cost nature of hotel ownership; our ability to
service, restructure or refinance our debt; compliance with regulatory regimes and local laws; uninsured or underinsured losses, including those relating to weather and climate-related events, natural disasters, civil unrest, terrorism or cyber-attacks and the physical effects and transition-related impacts of climate change; changes in distribution channels, such as through internet travel intermediaries or websites that facilitate the short-term rental of homes and apartments from owners; the amount of debt that we currently have or may incur in the future; provisions in our debt agreements that may restrict the operation of our business; our organizational and governance structure; our status as a real estate investment trust ("REIT"); our taxable REIT subsidiary ("TRS") lessee structure; the cost of compliance with and liabilities under environmental, health and safety laws; adverse litigation judgments or settlements or regulatory proceedings; changes in real estate and zoning laws; increases in insurance or other fixed costs and increases in real property tax valuations or rates; changes in federal, state or local tax law, including legislative, administrative, regulatory or other actions affecting REITs; changes in governmental regulations or interpretations thereof; and estimates relating to our ability to make distributions to our stockholders in the future.
These factors are not necessarily all of the important factors that could cause our actual financial results, performance, achievements or prospects to differ materially from those expressed in or implied by any of our forward-looking statements. Other unknown or unpredictable factors also could harm our results. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements set forth above. Forward-looking statements speak only as of the date they are made, and we do not undertake or assume any obligation to update publicly any of these forward-looking statements to reflect actual results, new information or future events, changes in assumptions or changes in other factors affecting forward-looking statements, except to the extent required by applicable laws. If we update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements.
The following discussion and analysis should be read in conjunction with the Company's Unaudited Condensed Consolidated Financial Statements and accompanying notes, which appear elsewhere in this Quarterly Report on Form 10-Q.
Overview
Xenia Hotels & Resorts, Inc. ("we", "us", "our", "Xenia" or the "Company") is a self-advised and self-administered REIT that invests in uniquely positioned luxury and upper upscale hotels and resorts with a focus on the top 25 lodging markets as well as key leisure destinations in the United States ("U.S."). As of September 30, 2025, we owned 30 hotels and resorts, comprising 8,868 rooms across 14 states. Our hotels are operated and/or licensed by industry leaders including Marriott, Hyatt, Kimpton, Fairmont, Loews, Hilton and The Kessler Collection.
Basis of Presentation
The accompanying condensed consolidated financial statements include the accounts of the Company, XHR LP (the "Operating Partnership"), and XHR Holding, Inc. and its subsidiaries. The Company's subsidiaries generally consist of limited liability companies, limited partnerships and the TRS. The effects of all inter-company transactions have been eliminated. Corporate costs directly associated with our executive offices, personnel and other administrative costs are reflected as general and administrative expenses on the condensed consolidated statements of operations and comprehensive income (loss).
Our Revenues and Expenses
Our revenue is primarily derived from hotel operations, including rooms revenue, food and beverage revenue and other revenue, which consists of parking, spa, resort fees, other guest services, and tenant leases, among other items.
Our operating costs and expenses consist of the costs to provide hotel services, including rooms expense, food and beverage expense, other direct and indirect operating expenses, and management and franchise fees. Rooms expense includes housekeeping wages and associated payroll taxes, room supplies, laundry services and front desk costs. Food and beverage expense primarily includes the cost of food, beverages and associated labor. Other direct and indirect hotel expenses include labor and other costs associated with the other operating department revenue, as well as labor and other costs associated with general and administrative departments, sales and marketing, information technology and telecommunications, repairs and maintenance and utility costs. We enter into management agreements with independent third-party management companies to operate our hotels. The management companies typically earn base and incentive management fees based on the levels of revenues and profitability of each individual hotel. Certain hotels that are not operated by brand managers incur franchise fees based on the level of revenues of each individual hotel.
Key Indicators of Operating Performance
We measure hotel results of operations and the operating performance of our business by evaluating financial and non-financial metrics such as Revenue Per Available Room ("RevPAR"); average daily rate ("ADR"); occupancy rate ("occupancy");
earnings before interest, income taxes, depreciation and amortization for real estate ("EBITDAre") and Adjusted EBITDAre; and funds from operations ("FFO") and Adjusted FFO. We evaluate individual hotel and company-wide performance with comparisons to budgets, prior periods and competing properties. RevPAR, ADR, and occupancy may be impacted by macroeconomic factors as well as regional and local economies and events. See "Non-GAAP Financial Measures" for further discussion of the Company's use, definitions and limitations of EBITDAre, Adjusted EBITDAre, FFO and Adjusted FFO.
Results of Operations
Lodging Industry Overview
The U.S. lodging industry historically exhibits a strong correlation to U.S. GDP, which decreased at an estimated annual rate of approximately 0.6% during the first quarter of 2025 and increased 3.8% during the second quarter of 2025, according to the U.S. Department of Commerce. As of the date of this filing, the estimated annual rate of change in U.S. GDP has not been released. In addition, the unemployment rate rose slightly to 4.3% in August 2025 compared to 4.1% in June 2025 and 4.2% in March 2025. We continue to monitor and evaluate the challenges associated with inflationary pressures, changing interest rates, a potential domestic and/or global recession, global conflicts, trade disputes, and the evolving workforce and wage landscape. The impact of these potential challenges could negatively impact the Company's operating results as well as its ability to consummate acquisitions and dispositions of hotel properties in the near term.
Demand decreased 0.6% and 0.2% during the three and nine months ended September 30, 2025, respectively. New hotel supply increased 0.9% and 0.7% during the same periods. A decrease in occupancy of 1.5% partially offset by a 0.1% increase in ADR led to a decrease in industry RevPAR of 1.4% for the three months ended September 30, 2025 compared to 2024. A decrease in occupancy of 0.9% partially offset by a 0.9% increase in ADR led to flat industry RevPAR for the nine months ended September 30, 2025 compared to 2024.
Third Quarter 2025 Overview
Our total portfolio RevPAR, which includes the results of hotels sold or acquired for the period of ownership by the Company, increased 2.2% and 4.3% to $164.51 and $182.03 for the three and nine months ended September 30, 2025 compared to $160.96 and $174.50 for the three and nine months ended September 30, 2024, respectively. The increase in our total portfolio RevPAR for the three and nine months ended September 30, 2025 compared to the same periods in 2024 was driven primarily by an increase average daily rate, disruption from renovations in 2024 and year over year growth at Grand Hyatt Scottsdale Resort due to continued ramp up in performance following the renovation. Further, demand has continued to shift to a more traditional mix of leisure, business transient and group within our portfolio. Excluding dispositions and Grand Hyatt Scottsdale Resort, which was undergoing a transformative renovation during 2024, total portfolio RevPAR decreased 2.6% and increased 0.6% to $167.87 and $183.64 for the three and nine months ended September 30, 2025 compared to $172.39 and $182.51 for the three and nine months ended September 30, 2024, respectively.
Net loss increased 95.5% for the three months ended September 30, 2025 compared to the three months ended September 30, 2024, which was primarily attributed to a $1.7 million increase in interest expense, a $1.6 million gain on the sale of Lorien Hotel & Spa in July 2024, a $1.3 million net reduction in operating income attributed to the sale of Lorien Hotel & Spa in July 2024 and Fairmont Dallas in April 2025, a $1.0 million increase in general and administrative expenses, a $1.0 million reduction in other income, a $0.7 million increase in depreciation and amortization expense and a $0.5 million increase in other operating expenses. These decreases were partially offset by a $0.5 million increase in gain on business interruption, a $0.1 million increase in hotel operating income for our 30-comparable hotels and a $0.1 million reduction in impairment and other losses.
Net income increased 243.1% for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024, which was primarily attributed to a $38.3 million increase on gain on sale of investment properties, a $23.8 million increase in hotel operating income for our 30-comparable hotels and a $0.2 million reduction in impairment and other losses. These increases were partially offset by income tax expense of $1.6 million compared to an income tax benefit of $4.0 million, a $5.3 million reduction in operating income attributed to the sale of Lorien Hotel & Spa in July 2024 and Fairmont Dallas in April 2025, a $4.0 million increase in interest expense, a $2.8 million increase in depreciation and amortization expense, a $1.1 million reduction in other income, a $0.3 million increase in other operating expenses, a $0.2 million decrease in gain on business interruption and a $0.1 million increase in general and administrative expenses.
Adjusted EBITDAre attributable to common stock and unit holders for the three and nine months ended September 30, 2025 decreased 4.6% and increased 9.4%, respectively, compared to the three and nine months ended September 30, 2024 and Adjusted FFO attributable to common stock and unit holders decreased 15.1% and increased 5.1% for the same periods. Refer to "Non-GAAP Financial Measures" for the definition of these financial measures, a description of the reasons we believe they are useful to investors as key supplemental measures of our operating performance and the reconciliation of these non-GAAP financial measures to net income attributable to common stock and unit holders.
Operating Information Comparison
The following table sets forth certain operating information for the three and nine months ended September 30, 2025 and 2024:
|
Nine Months Ended September 30, |
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| 2025 | 2024 | Change | |||||||||||||||||||||||||||||||||
| Number of properties at January 1 | 31 | 32 | (1) | ||||||||||||||||||||||||||||||||
|
Properties disposed
|
(1) | (1) | - | ||||||||||||||||||||||||||||||||
| Number of properties at September 30 | 30 | 31 | (1) | ||||||||||||||||||||||||||||||||
|
Number of rooms at January 1
|
9,408 | 9,514 | (106) | ||||||||||||||||||||||||||||||||
|
Rooms in properties acquired(1)
|
5 | 1 | 4 | ||||||||||||||||||||||||||||||||
|
Rooms in properties disposed(2)
|
(545) | (107) | (438) | ||||||||||||||||||||||||||||||||
| Number of rooms at September 30 | 8,868 | 9,408 | (540) | ||||||||||||||||||||||||||||||||
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
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| 2025 | 2024 | Change | 2025 | 2024 | Change | ||||||||||||||||||||||||||||||
| Total Portfolio Statistics: | |||||||||||||||||||||||||||||||||||
| Occupancy | 66.3 | % | 66.9 | % | (60) | bps | 69.3 | % | 68.4 | % | 90 | bps | |||||||||||||||||||||||
| ADR | $ | 248.10 | $ | 240.71 | 3.1 | % | $ | 262.83 | $ | 255.02 | 3.1 | % | |||||||||||||||||||||||
| RevPAR | $ | 164.51 | $ | 160.96 | 2.2 | % | $ | 182.03 | $ | 174.50 | 4.3 | % | |||||||||||||||||||||||
(1) In February 2025, we added five newly created rooms at Grand Hyatt Scottsdale Resort. In March 2024, we added one newly created room at Grand Bohemian Hotel Orlando, Autograph Collection.
(2) During the nine months ended September 30, 2025, the Company sold one hotel with 545 rooms. During the nine months ended September 30, 2024, the Company sold one hotel with 107 rooms.
Revenues
Revenues consists of rooms, food and beverage, and other revenues from our hotels, as follows (in thousands):
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | Change | % Change | 2025 | 2024 | Change | % Change | ||||||||||||||||||||||||||||||||||||||||
| Revenues: | |||||||||||||||||||||||||||||||||||||||||||||||
| Rooms revenues | $ | 134,217 | $ | 139,577 | $ | (5,360) | (3.8) | % | $ | 452,580 | $ | 453,487 | $ | (907) | (0.2) | % | |||||||||||||||||||||||||||||||
| Food and beverage revenues | 77,768 | 74,790 | 2,978 | 4.0 | % | 284,653 | 256,643 | 28,010 | 10.9 | % | |||||||||||||||||||||||||||||||||||||
| Other revenues | 24,432 | 22,439 | 1,993 | 8.9 | % | 75,690 | 67,068 | 8,622 | 12.9 | % | |||||||||||||||||||||||||||||||||||||
| Total revenues | $ | 236,417 | $ | 236,806 | $ | (389) | (0.2) | % | $ | 812,923 | $ | 777,198 | $ | 35,725 | 4.6 | % | |||||||||||||||||||||||||||||||
Rooms revenues
Rooms revenues for our total portfolio decreased $5.4 million, or 3.8%, to $134.2 million for the three months ended September 30, 2025 from $139.6 million for the three months ended September 30, 2024 primarily driven by a reduction of $5.5 million attributed to the sale of Lorien Hotel & Spa in July 2024 and Fairmont Dallas in April 2025 and the impact of short-term demand lift from hurricanes in the prior year, partially offset by an increase in average daily rate as well as disruption from renovations in the prior period. Excluding dispositions and Grand Hyatt Scottsdale Resort, rooms revenues for the three months ended September 30, 2025 decreased $3.5 million, or 2.6%, when compared to the prior period.
Rooms revenues for our total portfolio decreased $0.9 million, or 0.2%, to $452.6 million for the nine months ended September 30, 2025 from $453.5 million for the nine months ended September 30, 2024 primarily driven by a reduction of $15.4 million attributed to the sale of Lorien Hotel & Spa in July 2024 and Fairmont Dallas in April 2025 and the impact of short-term demand lift from hurricanes in the prior year, partially offset by increases in occupancy and average daily rate, as
well as disruption from renovations in the prior period. Excluding dispositions and Grand Hyatt Scottsdale Resort, rooms revenues for the nine months ended September 30, 2025 increased $1.1 million, or 0.3%, when compared to the prior period.
Food and beverage revenues
Food and beverage revenues increased $3.0 million, or 4.0%, to $77.8 million for the three months ended September 30, 2025 from $74.8 million for the three months ended September 30, 2024 primarily due to disruption from renovations in the prior period. The increase is net of a reduction of $3.0 million attributed to the sale of Lorien Hotel & Spa in July 2024 and Fairmont Dallas in April 2025. Excluding dispositions and Grand Hyatt Scottsdale Resort, food and beverage revenues for the three months ended September 30, 2025 increased $0.3 million, or 0.4%, when compared to the prior period.
Food and beverage revenues increased $28.0 million, or 10.9%, to $284.7 million for the nine months ended September 30, 2025 from $256.6 million for the nine months ended September 30, 2024 primarily due to an increase in occupancy, disruption from renovations in the prior period and growth in banquets and catering resulting from strong group business demand. The increase is net of a reduction of $7.8 million attributed to the sale of Lorien Hotel & Spa in July 2024 and Fairmont Dallas in April 2025. Excluding dispositions and Grand Hyatt Scottsdale Resort, food and beverage revenues for the nine months ended September 30, 2025 increased $18.3 million, or 7.8%, when compared to the prior period.
Other revenues
Other revenues increased $2.0 million, or 8.9%, to $24.4 million for the three months ended September 30, 2025 from $22.4 million for the three months ended September 30, 2024 primarily due to an increase in ancillary fees as well as disruption from renovations in the prior period. This increase is net of a reduction of $0.5 million attributed to the sale of Lorien Hotel & Spa in July 2024 and Fairmont Dallas in April 2025. Excluding dispositions and Grand Hyatt Scottsdale Resort, other revenues for the three months ended September 30, 2025 increased $1.5 million, or 7.2%, when compared to the prior period.
Other revenues increased $8.6 million, or 12.9%, to $75.7 million for the nine months ended September 30, 2025 from $67.1 million for the nine months ended September 30, 2024 primarily as a result of increases in occupancy and ancillary fees as well as disruption from renovations in the prior period. This increase is net of a reduction of $1.4 million attributed to the sale of Lorien Hotel & Spa in July 2024 and Fairmont Dallas in April 2025. Excluding dispositions and Grand Hyatt Scottsdale Resort, other revenues for the nine months ended September 30, 2025 increased $7.1 million, or 11.6%, when compared to the prior period.
Hotel Operating Expenses
Hotel operating expenses consist of the following (in thousands):
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | Change | % Change | 2025 | 2024 | Change | % Change | ||||||||||||||||||||||||||||||||||||||||
| Hotel operating expenses: | |||||||||||||||||||||||||||||||||||||||||||||||
| Rooms expenses | $ | 37,499 | $ | 37,535 | $ | (36) | (0.1) | % | $ | 115,977 | $ | 114,756 | $ | 1,221 | 1.1 | % | |||||||||||||||||||||||||||||||
| Food and beverage expenses | 58,103 | 56,473 | 1,630 | 2.9 | % | 190,256 | 177,587 | 12,669 | 7.1 | % | |||||||||||||||||||||||||||||||||||||
| Other direct expenses | 6,860 | 5,980 | 880 | 14.7 | % | 20,919 | 18,824 | 2,095 | 11.1 | % | |||||||||||||||||||||||||||||||||||||
| Other indirect expenses | 67,264 | 68,332 | (1,068) | (1.6) | % | 206,951 | 205,714 | 1,237 | 0.6 | % | |||||||||||||||||||||||||||||||||||||
| Management and franchise fees | 7,382 | 7,362 | 20 | 0.3 | % | 29,502 | 27,646 | 1,856 | 6.7 | % | |||||||||||||||||||||||||||||||||||||
| Total hotel operating expenses | $ | 177,108 | $ | 175,682 | $ | 1,426 | 0.8 | % | $ | 563,605 | $ | 544,527 | $ | 19,078 | 3.5 | % | |||||||||||||||||||||||||||||||
Total hotel operating expenses
In general, hotel operating costs correlate to increases or decreases in revenues and fluctuate based on various factors, including occupancy, labor costs, utilities and insurance costs. Luxury and upper upscale hotels generally have higher fixed costs than other types of hotels due to the level of services and amenities provided to guests.
Total hotel operating expenses increased $1.4 million, or 0.8%, to $177.1 million for the three months ended September 30, 2025 from $175.7 million for the three months ended September 30, 2024 largely due to disruption from renovations in the prior period. This increase is net of a reduction of $8.4 million attributed to the sale of Lorien Hotel & Spa in July 2024 and Fairmont Dallas in April 2025. Excluding dispositions and Grand Hyatt Scottsdale Resort, total hotel operating expenses for the three months ended September 30, 2025 increased $2.3 million, or 1.4%, when compared to the prior period.
Total hotel operating expenses increased $19.1 million, or 3.5%, to $563.6 million for the nine months ended September 30, 2025 from $544.5 million for the nine months ended September 30, 2024 largely due to increases in occupancy as well as disruption from renovations in the prior period. This increase is net of a reduction of $18.1 million attributed to the sale of Lorien Hotel & Spa in July 2024 and Fairmont Dallas in April 2025. Excluding dispositions and Grand Hyatt Scottsdale Resort, total hotel operating expenses for the nine months ended September 30, 2025 increased $18.6 million, or 3.8%, when compared to the prior period.
Corporate and Other Expenses
Corporate and other expenses consist of the following (in thousands):
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | Change | % Change | 2025 | 2024 | Change | % Change | ||||||||||||||||||||||||||||||||||||||||
| Depreciation and amortization | $ | 32,583 | $ | 31,839 | $ | 744 | 2.3 | % | $ | 98,406 | $ | 95,626 | $ | 2,780 | 2.9 | % | |||||||||||||||||||||||||||||||
| Real estate taxes, personal property taxes and insurance | 13,108 | 13,112 | (4) | - | % | 38,765 | 39,945 | (1,180) | (3.0) | % | |||||||||||||||||||||||||||||||||||||
| Ground lease expense | 264 | 788 | (524) | (66.5) | % | 1,622 | 2,411 | (789) | (32.7) | % | |||||||||||||||||||||||||||||||||||||
| General and administrative expenses | 8,793 | 7,817 | 976 | 12.5 | % | 28,526 | 28,416 | 110 | 0.4 | % | |||||||||||||||||||||||||||||||||||||
| Gain on business interruption insurance | (510) | - | (510) | 100.0 | % | (510) | (745) | 235 | (31.5) | % | |||||||||||||||||||||||||||||||||||||
| Other operating expenses (credits) | 355 | (103) | 458 | (444.7) | % | 1,432 | 1,104 | 328 | 29.7 | % | |||||||||||||||||||||||||||||||||||||
| Impairment and other losses | - | 121 | (121) | (100.0) | % | 279 | 471 | (192) | (40.8) | % | |||||||||||||||||||||||||||||||||||||
| Total corporate and other expenses | $ | 54,593 | $ | 53,574 | $ | 1,019 | 1.9 | % | $ | 168,520 | $ | 167,228 | $ | 1,292 | 0.8 | % | |||||||||||||||||||||||||||||||
Depreciation and amortization
Depreciation and amortization expense increased $0.7 million, or 2.3%, to $32.6 million for the three months ended September 30, 2025 from $31.8 million for the three months ended September 30, 2024. The increase was primarily attributed to the timing of new assets being placed in service partially offset by fully depreciated assets during the comparable periods and the sale of Fairmont Dallas in April 2025.
Depreciation and amortization expense increased $2.8 million, or 2.9%, to $98.4 million for the nine months ended September 30, 2025 from $95.6 million for the nine months ended September 30, 2024. The increase was primarily attributed to the timing of new assets being placed in service partially offset by fully depreciated assets during the comparable periods and the sale of Lorien Hotel & Spa in July 2024 and Fairmont Dallas in April 2025.
Real estate taxes, personal property taxes and insurance
Real estate taxes, personal property taxes and insurance expense decreased $1.2 million, or 3.0%, to $38.8 million for the nine months ended September 30, 2025 from $39.9 million for the nine months ended September 30, 2024. This decrease was primarily attributed to a reduction of $1.1 million attributed to the sale of Lorien Hotel & Spa in July 2024 and Fairmont Dallas in April 2025 and a $0.6 million reduction in insurance expense, partially offset by a $0.5 million increase in real estate taxes.
Ground lease expense
Ground lease expense decreased $0.5 million, or 66.5%, and $0.8 million, or 32.7%, to $0.3 millionand $1.6 million for the three and nine months ended September 30, 2025from $0.8 millionand $2.4 million for the three and nine months ended September 30, 2024. The decrease was primarily attributable to the purchase of the fee simple interest in the land associated with the ground lease at Hyatt Regency Santa Clara in Santa Clara in March 2025.
General and administrative expenses
General and administrative expenses increased $1.0 million, or 12.5%, to $8.8 million for the three months ended September 30, 2025 from $7.8 million for the three months ended September 30, 2024. The increase is primarily related to an increase in stock compensation expense resulting from the timing of accelerated expense recognition for awards granted to participants that have met or will meet retirement eligibility requirements prior to the applicable vesting dates.
General and administrative expenses increased $0.1 million, or 0.4%, to $28.5 million for the nine months ended September 30, 2025 from $28.4 million for the nine months ended September 30, 2024. The increase is primarily related to increases in professional fees and other costs, partially offset by a decrease in stock compensation expense resulting from the timing of accelerated expense recognition for awards granted to participants that have met or will meet retirement eligibility requirements prior to the applicable vesting dates.
Gain on business interruption insurance
Gain on business interruption insurance was $0.5 million for the three and nine months ended September 30, 2025, which was attributed to insurance proceeds, net of license and management fees, for a portion of lost income related to two incidents which occurred in 2024.
Gain on business interruption insurance was $0.7 million for the nine months ended September 30, 2024, which was attributed to insurance proceeds, net of license and management fees, for a portion of lost income related to a restaurant kitchen fire which occurred in 2023.
Other operating expenses
Other operating expenses increased $0.5 million, or 444.7%, and $0.3 million, or 29.7%, to $0.4 million and $1.4 million for the three and nine months ended September 30, 2025 from a credit of $0.1 million and from expense of $1.1 million compared to the three and nine months ended September 30, 2024 primarily due to a state franchise tax refund recognized in the prior year partially offset by decreases in pre-opening expenses.
Non-Operating Income and Expenses
Non-operating income and expenses consist of the following (in thousands):
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | Change | % Change | 2025 | 2024 | Change | % Change | ||||||||||||||||||||||||||||||||||||||||
| Non-operating income and expenses: | |||||||||||||||||||||||||||||||||||||||||||||||
|
Gain on sale of investment properties
|
$ | - | $ | 1,628 | $ | (1,628) | (100.0) | % | $ | 39,953 | $ | 1,628 | $ | 38,325 | 2,354.1 | % | |||||||||||||||||||||||||||||||
| Other income | 1,890 | 2,924 | (1,034) | (35.4) | % | 6,149 | 7,296 | (1,147) | (15.7) | % | |||||||||||||||||||||||||||||||||||||
| Interest expense | (21,818) | (20,144) | (1,674) | 8.3 | % | (64,795) | (60,747) | (4,048) | 6.7 | % | |||||||||||||||||||||||||||||||||||||
| Income tax (expense) benefit | 684 | 609 | 75 | 12.3 | % | (1,565) | 4,027 | (5,592) | (138.9) | % | |||||||||||||||||||||||||||||||||||||
Gain on sale of investment properties
The gain on sale of investment properties for the nine months ended September 30, 2025 was attributed to the sale of Fairmont Dallas in April 2025. The gain on sale of investment properties for the three and nine months ended September 30, 2024 was attributed to the sale of Lorien Hotel & Spa in July 2024.
Other income
Other income decreased $1.0 million, or 35.4%, to $1.9 million for the three months ended September 30, 2025 from $2.9 million for the three months ended September 30, 2024 primarily attributed to a net $0.8 million non-recurring loss at one property and a $0.1 million decrease in interest income.
Other income decreased $1.1 million, or 15.7%, to $6.1 million for the nine months ended September 30, 2025 from $7.3 million for the nine months ended September 30, 2024. This decrease was primarily attributed to a $0.8 million non-recurring loss at one property, a $0.7 million net decrease in recognized gain on insurance recoveries and a $0.3 million decrease in interest income. These decreases were partially offset by the recognition of a $1.1 million net gain related to the write off of the right-of-use and lease liability related to the purchase of the fee simple interest in the land underlying the Hyatt Regency Santa Clara.
Interest expense
Interest expense increased $1.7 million, or 8.3%, and $4.0 million, or 6.7%, to $21.8 million and $64.8 million for the three and nine months ended September 30, 2025 from $20.1 million and $60.7 million for the three and nine months ended September 30, 2024 primarily due to higher average outstanding term loan debt, rising interest rates on variable debt coupled with the expiration of interest rate hedges in February 2025 and a reduction in capitalized interest. These increases were partially offset by lower outstanding balances on the Senior Notes.
Income tax (expense) benefit
Income tax expense increased $5.6 million, or 138.9%, to $1.6 million for the nine months ended September 30, 2025 from income tax benefit of $4.0 million for the nine months ended September 30, 2024. This increase is primarily attributed to a $5.2 million tax benefit in the prior period associated with the release of the valuation allowance related to certain state net operating loss carryforwards, higher projected taxable income when compared to the prior periods and the use of federal and state net operating loss carryforwards.
Liquidity and Capital Resources
We expect to meet our short-term liquidity requirements from cash on hand, cash flow from hotel operations, use of our unencumbered asset base, asset dispositions, borrowings under our Revolving Credit Facility, and proceeds from various capital market transactions, including issuances of debt and equity securities. The objectives of our cash management policy are to maintain the availability of liquidity and minimize operational costs.
On a long-term basis, our objectives are to maximize revenue and profits generated by our existing properties and acquired hotels, to further enhance the value of our portfolio and produce an attractive current yield, as well as to generate sustainable and predictable cash flow from our operations to distribute to our common stock and unit holders. To the extent we are able to successfully improve the performance of our portfolio, we believe this will result in increased operating cash flows. Additionally, we may meet our long-term liquidity requirements through additional borrowings, the issuance of equity and debt securities, which may not be available on advantageous terms or at all, and/or proceeds from the sales of hotels.
Liquidity
As of September 30, 2025, we had $188.2 million of consolidated cash and cash equivalents and $80.7 million of restricted cash and escrows. The restricted cash as of September 30, 2025 primarily consisted of $68.0 million related to FF&E reserves as required per the terms of our management and franchise agreements, $5.1 million in an interest-bearing escrow account held with a lender, cash held in restricted escrows of $3.8 million primarily for real estate taxes and mortgage escrows, $2.2 million for escrow holdbacks and $1.6 million in deposits made for capital projects.
As of September 30, 2025, there was no outstanding balance on our Revolving Credit Facility and the full $500 million was available to be borrowed.
As of September 30, 2025, we had $200 million available for sale under the ATM Agreement.
We remain committed to increasing total shareholder returns through the following priorities: (1) maximize revenue and profits generated by our existing properties and acquired hotels, including the continued focused management of expenses, (2) further enhance the value of our portfolio and produce an attractive current yield and (3) generate sustainable and predictable cash flow from our operations to distribute to our common stock and unit holders. Future determinations regarding the declaration and payment of dividends will be at the discretion of our Board of Directors and will depend on then-existing conditions, including our results of operations, payout ratio, capital requirements, financial condition, prospects, contractual arrangements, any
limitations on payment of dividends present in our current and future debt agreements, maintaining our REIT status and other factors that our Board of Directors may deem relevant.
We believe that our cash position, short-term investments, cash from operations, borrowing capacity under our Revolving Credit Facility, and access to the capital markets, including pursuant to our ATM program, will be adequate to meet all of our funding requirements and capital deployment objectives both in the short-term and long-term.
Debt and Loan Covenants
As of September 30, 2025, our outstanding total debt was $1.4 billion and had a weighted-average interest rate of 5.63%.
Mortgage Loans
Our mortgage loan agreements require contributions to be made to FF&E reserves and the compliance with certain financial covenants. We intend to payoff with cash on hand the mortgage loan maturing March 2026 collateralized by Grand Bohemian Hotel Orlando, Autograph Collection.
Corporate Credit Facilities
In January 2023, the Operating Partnership entered into a senior unsecured credit facility pursuant to a Revolving Credit and Term Loan Agreement, dated as of January 10, 2023 (the "2023 Credit Agreement"), by and among the Operating Partnership, JPMorgan Chase Bank, N.A., as administrative agent, and the lenders and other parties thereto. In November 2024, the Operating Partnership amended and restated the 2023 Credit Agreement to replace the credit facilities outstanding thereunder with a new $825 million senior unsecured credit facility comprised of a $500 million revolving line of credit (the "Revolving Credit Facility"), a $225 million term loan (the "2024 Initial Term Loan"), and a $100 million delayed draw term loan commitment (the loans to be extended thereunder, the "2024 Delayed Draw Term Loan" and, together with the 2024 Initial Term Loan, the "2024 Term Loans"), pursuant to an amended and restated revolving credit and term loan agreement with a syndicate of bank lenders, JPMorgan Chase Bank, N.A., as administrative agent, and the other parties thereto (the "Amended and Restated Credit Agreement"). A portion of the revolving loan commitments under the Amended and Restated Credit Agreement is available for the issuance of letters of credit in an amount not to exceed $25 million. The Amended and Restated Credit Agreement provides the Operating Partnership with the option to request an uncommitted increase in the revolving loan commitments and/or add an uncommitted term loan in an aggregate principal amount of $300 million. The Revolving Credit Facility matures in November 2028 and can be extended up to two additional six-month periods. The Revolving Credit Facility's interest rate is based, at the Company's option, on a pricing grid with a range of (i) 145 to 275 basis points over the applicable term SOFR rate or (ii) 45 to 175 basis points over the applicable alternative base rate, in each case as determined by the Company's leverage ratio. The proceeds of the 2024 Initial Term Loan were used to refinance the Operating Partnership's previously outstanding term loans.
In January 2025, the Company drew the 2024 Delayed Draw Term Loan and used a portion of the borrowings to repay the then outstanding balance on the Revolving Credit Facility. In accordance with the Amended and Restated Credit Agreement, the remaining proceeds may be used by the Company to refinance other indebtedness and for general working capital purposes. The 2024 Term Loans each mature in November 2028, can be extended up to two additional six-month periods, and bear interest rates consistent with the pricing grid on the Revolving Credit Facility.
In October 2025, the Operating Partnership entered into an Amendment No. 1 to Amended and Restated Revolving Credit and Term Loan Agreement (the "First Amendment to Amended and Restated Credit Agreement"), pursuant to which interest payable pursuant to the Amended and Restated Credit Agreement was reduced by removing the 0.10% credit spread adjustment to the term SOFR rate therein.
Senior Notes
On May 27, 2021, the Operating Partnership entered into the indenture governing our 2029 Senior Notes ("the 2029 Notes Indenture"). On November 25, 2024, the Operating Partnership entered into the indenture governing our 2030 Senior Notes (the "2030 Notes Indenture" and together with the 2029 Notes Indenture, the "indentures"). The indentures contain customary covenants that limit the Operating Partnership's ability and, in certain circumstances, the ability of its subsidiaries, to borrow money, create liens on assets, make distributions and pay dividends, redeem or repurchase stock, make certain types of investments, sell stock in certain subsidiaries, enter into agreements that restrict dividends or other payments from subsidiaries, enter into transactions with affiliates, issue guarantees of indebtedness, and sell assets or merge with other companies. These limitations are subject to a number of important exceptions and qualifications set forth in the indentures.
From time to time, we will consider open market purchases or tenders of our Senior Notes or other public indebtedness when considered advantageous relative to other uses of capital.
Debt Covenants
As of September 30, 2025, the Company was in violation of a debt covenant on one mortgage loan. The Company had cured the violation by depositing a total of $5.1 million, inclusive of $2.7 million funded in 2024, in an interest-bearing escrow account held by the lender and deposited an additional $0.3 million in October 2025. As of September 30, 2025, the Company was in compliance with all other debt covenants, current on all loan payments and not otherwise in default under the Revolving Credit Facility, 2024 Term Loans, remaining mortgage loans or Senior Notes.
Derivatives
As of September 30, 2025, we had one interest rate swap with an aggregate notional amount of $55.0 million. This swap fixes the variable interest rate on one mortgage loan for a portion of the term.
Capital Markets
We maintain an ATM program pursuant to the ATM Agreement. In accordance with the terms of the ATM Agreement, the Company may from time to time offer and sell shares of its common stock having an aggregate gross offering price of up to $200 million. No shares were sold under the ATM Agreement during the three and nine months ended September 30, 2025. As of September 30, 2025, we had $200 million available for sale under the ATM Agreement.
The Board of Directors has authorized a stock repurchase program pursuant to which we are authorized to repurchase our common stock, par value $0.01 per share, in the open market, in privately negotiated transactions or otherwise, including pursuant to Rule 10b5-1 plans (the "Repurchase Program"). Such repurchases or exchanges, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The Repurchase Program does not have an expiration date. This Repurchase Program may be suspended or discontinued at any time and does not obligate us to acquire any particular amount of shares.
During the three and nine months ended September 30, 2025, 974,645 and 6,656,706 shares were repurchased under the Repurchase Program, at a weighted-average price of $12.66 and $12.59 per share for an aggregate purchase price of $12.3 million and $83.8 million, respectively. During the three and nine months ended September 30, 2024, 146,863 and 614,970 shares were repurchased under the Repurchase Program, at a weighted-average price of $12.78 and $13.34 per share for an aggregate purchase price of $1.9 million and $8.2 million, respectively. As of September 30, 2025, the Company had approximately $134.1 million remaining under its share repurchase authorization.
Capital Expenditures and Reserve Funds
We maintain each of our properties in good repair and condition and in conformity with applicable laws and regulations, franchise agreements and management agreements. Routine capital expenditures are administered by the property management companies. However, we have approval rights over the capital expenditures as part of the annual budget process for each of our properties. From time to time, certain of our hotels may be undergoing renovations as a result of our decision to upgrade portions of the hotels, such as guest rooms, public space, meeting space and/or restaurants, in order to better compete with other hotels in our markets. In addition, upon the acquisition of a hotel we often are required to complete a property improvement plan in order to bring the hotel into compliance with the respective brand standards. If permitted by the terms of the management agreement, funding for a renovation will first come from the FF&E reserves. We are obligated to maintain reserve funds with respect to certain agreements with our hotel management companies, franchisors and lenders to provide funds, generally 3% to 5% of hotel revenues, sufficient to cover the cost of certain capital improvements to the hotels and to periodically replace and update furniture, fixtures and equipment. Most of the agreements require that we reserve this cash in separate accounts. To the extent that the FF&E reserves are not available or adequate to cover the cost of the renovation, we may fund a portion of the renovation with cash on hand, borrowings from our revolving credit facility and/or other sources of available liquidity. We have been and will continue to be prudent with respect to our capital spending, taking into account our cash flows from operations.
As of September 30, 2025 and December 31, 2024, we had a total of $68.0 million and $58.9 million, respectively, of FF&E reserves. During the three and nine months ended September 30, 2025 we made total capital expenditures of $19.9 million and $70.7 million, respectively, and during three and nine months ended September 30, 2024, we made total capital expenditures of $46.9 million and $116.2 million, respectively.
Off-Balance Sheet Arrangements
As of September 30, 2025, we had various contracts outstanding with third-parties in connection with the renovation of certain of our hotel properties. The remaining commitments under these contracts as of September 30, 2025 totaled $14.5 million.
Sources and Uses of Cash
Our principal sources of cash are cash flows from operations, borrowings under debt financings, including draws on our Revolving Credit Facility and from various types of equity offerings or the sale of our hotels. Our principal uses of cash are asset acquisitions, capital investments, routine debt service and debt repayments, operating costs, corporate expenses and dividends. We may also elect to use cash to buy back our common stock in the future under the Repurchase Program.
Comparison of the Nine Months Ended September 30, 2025 to the Nine Months Ended September 30, 2024
The table below presents summary cash flow information for the condensed consolidated statements of cash flows (in thousands):
| Nine Months Ended September 30, | |||||||||||
| 2025 | 2024 | ||||||||||
| Net cash provided by operating activities | $ | 155,123 | $ | 133,138 | |||||||
| Net cash provided by (used in) investing activities | 8,729 | (84,476) | |||||||||
| Net cash used in financing activities | (38,459) | (47,110) | |||||||||
| Net increase in cash and cash equivalents and restricted cash | $ | 125,393 | $ | 1,552 | |||||||
| Cash and cash equivalents and restricted cash, at beginning of period | 143,582 | 223,075 | |||||||||
| Cash and cash equivalents and restricted cash, at end of period | $ | 268,975 | $ | 224,627 | |||||||
Operating
•Cash provided by operating activities was $155.1 million and $133.1 million for the nine months ended September 30, 2025 and 2024, respectively. Cash flows from operating activities generally consist of the net cash generated by our hotel operations, partially offset by the cash paid for interest, corporate expenses and other working capital changes. Our cash flows from operating activities may also be affected by changes in our portfolio resulting from hotel acquisitions, dispositions or from disruption and subsequent improvements resulting from renovations. The net increase to cash provided by operating activities during the nine months ended September 30, 2025 was primarily due to an increase in operating income and the timing of working capital transactions. Refer to the "Results of Operations" section for further discussion of our operating results for the three and nine months ended September 30, 2025 and 2024.
Investing
•Cash provided by (used in) investing activities was $8.7 million and $(84.5) million for the nine months ended September 30, 2025 and 2024, respectively. Cash provided by investing activities for the nine months ended September 30, 2025 was attributed to net proceeds of $101.4 million from the sale of Fairmont Dallas and $3.5 million of proceeds from property insurance, partially offset by $70.7 million in capital improvements at our hotel properties and $25.4 million for the purchase of the fee simple interest in the land associated with the ground lease at Hyatt Regency Santa Clara. Cash used in investing activities for the nine months ended September 30, 2024 was attributed to $116.2 million in capital improvements at our hotel properties, which was partially offset by net proceeds of $29.1 million from the sale of Lorien Hotel & Spa, $2.4 million of proceeds from property insurance and $0.2 million of performance guaranty payments received that were recorded as a reduction in the respective hotel's cost basis.
Financing
•Cash used in financing activities was $38.5 million and $47.1 million for the nine months ended September 30, 2025 and 2024, respectively. Cash used in financing activities for the nine months ended September 30, 2025 was attributed to (i) the repurchase of common stock totaling $83.8 million, (ii) the payment of $40.5 million in dividends, (iii) the repayment of the Revolving Credit Facility of $20.0 million, (iv) principal payments of mortgage debt totaling $3.3 million, (v) shares redeemed to satisfy tax withholding on vested share-based compensation of $0.6 million and (vi) the redemption of Operating Partnership Units for cash of $0.3 million, partially offset by the proceeds from the 2024 Delayed Draw Term Loan of $100.0 million and proceeds from a $10.0 million draw on the Revolving Credit Facility. Cash used in financing activities for the nine months ended September 30, 2024 was attributed (i) to the payment of $35.4 million in dividends, (ii) the repurchase of common stock totaling $8.2 million, (iii) principal payments of mortgage debt totaling $2.5 million, (iv) the redemption of Operating Partnership Units for cash of $0.7 million and (v) shares redeemed to satisfy tax withholding on vested share-based compensation of $0.4 million.
Non-GAAP Financial Measures
We consider the following non-GAAP financial measures useful to investors as key supplemental measures of our operating performance: EBITDA, EBITDAre, Adjusted EBITDAre, FFO and Adjusted FFO. These non-GAAP financial measures should be considered along with, but not as alternatives to, net income or loss, operating profit, cash from operations, or any other operating performance measure as prescribed per GAAP.
EBITDA, EBITDAre and Adjusted EBITDAre
EBITDA is a commonly used measure of performance in many industries and is defined as net income or loss (calculated in accordance with GAAP) excluding interest expense, provision for income taxes (including income taxes applicable to sale of assets) and depreciation and amortization. We consider EBITDA useful to an investor regarding our results of operations, in evaluating and facilitating comparisons of our operating performance between periods and between REITs by removing the impact of our capital structure (primarily interest expense) and asset base (primarily depreciation and amortization) from our operating results, even though EBITDA does not represent an amount that accrues directly to common stockholders. In addition, EBITDA is used as one measure in determining the value of hotel acquisitions and dispositions and along with FFO and Adjusted FFO is used by management in the annual budget process for compensation programs.
We then calculate EBITDAre in accordance with standards established by the National Association of Real Estate Investment Trusts ("Nareit"). Nareit defines EBITDAre as EBITDA plus or minus losses and gains on the disposition of depreciated property, including gains or losses on change of control, plus impairment write-downs of depreciated property and of investments in unconsolidated affiliates caused by a decrease in value of depreciated property in the affiliate, and adjustments to reflect the entity's share of EBITDAre of unconsolidated affiliates.
We further adjust EBITDAre to exclude the impact of non-controlling interests in consolidated entities other than our Operating Partnership Units because our Operating Partnership Units may be redeemed for common stock. We believe it is meaningful for the investor to understand Adjusted EBITDAre attributable to all common stock and Operating Partnership unit holders. We also adjust EBITDAre for certain additional items such as depreciation and amortization related to corporate assets, terminated transaction and pre-opening expenses, amortization of share-based compensation, non-cash ground rent and straight-line rent expense, the cumulative effect of changes in accounting principles, and other costs we believe do not represent recurring operations and are not indicative of the performance of our underlying hotel property entities. We believe Adjusted EBITDAre attributable to common stock and unit holders provides investors with another financial measure in evaluating and facilitating comparison of operating performance between periods and between REITs that report similar measures.
FFO and Adjusted FFO
We calculate FFO in accordance with standards established by Nareit, as amended in the 2018 Restatement White Paper, which defines FFO as net income or loss (calculated in accordance with GAAP), excluding real estate-related depreciation, amortization and impairments, gains or losses from sales of real estate, the cumulative effect of changes in accounting principles, similar adjustments for unconsolidated partnerships and consolidated variable interest entities, and items classified by GAAP as extraordinary. Historical cost accounting for real estate assets implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values instead have historically risen or fallen with market conditions, most industry investors consider presentations of operating results for real estate companies that use historical cost accounting to be insufficient by themselves. We believe that the presentation of FFO provides useful supplemental information to investors regarding our operating performance by excluding the effect of real estate depreciation and amortization, gains or losses from sales for real estate, impairments of real estate assets, extraordinary items and the portion of these items related to unconsolidated entities, all of which are based on historical cost accounting and which may be of lesser significance in evaluating current performance. We believe that the presentation of FFO can facilitate comparisons of operating performance between periods and between REITs, even though FFO does not represent an amount that accrues directly to common stockholders. Our calculation of FFO may not be comparable to measures calculated by other companies who do not use the Nareit definition of FFO or do not calculate FFO per diluted share in accordance with Nareit guidance. Additionally, FFO may not be helpful when comparing us to non-REITs. We present FFO attributable to common stock and unit holders, which includes our Operating Partnership Units because our Operating Partnership Units may be redeemed for common stock. We believe it is meaningful for the investor to understand FFO attributable to all common stock and unit holders.
We further adjust FFO for certain additional items that are not in Nareit's definition of FFO such as terminated transaction and pre-opening expenses, amortization of debt origination costs and share-based compensation, non-cash ground rent and straight-line rent expense and other items we believe do not represent recurring operations. We believe that Adjusted FFO provides investors with useful supplemental information that may facilitate comparisons of ongoing operating performance between periods and between REITs that make similar adjustments to FFO and is beneficial to investors' complete understanding of our operating performance.
The following is a reconciliation of net income (loss) to EBITDA, EBITDAre and Adjusted EBITDAre attributable to common stock and unit holders for the three and nine months ended September 30, 2025 and 2024 (in thousands):
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Net income (loss) | $ | (14,528) | $ | (7,433) | $ | 60,540 | $ | 17,647 | |||||||||||||||
| Adjustments: | |||||||||||||||||||||||
| Interest expense | 21,818 | 20,144 | 64,795 | 60,747 | |||||||||||||||||||
| Income tax expense (benefit) | (684) | (609) | 1,565 | (4,027) | |||||||||||||||||||
| Depreciation and amortization | 32,583 | 31,839 | 98,406 | 95,626 | |||||||||||||||||||
| EBITDA | $ | 39,189 | $ | 43,941 | $ | 225,306 | $ | 169,993 | |||||||||||||||
| Impairment of investment properties | - | - | 279 | - | |||||||||||||||||||
| Gain on sale of investment properties | - | (1,628) | (39,953) | (1,628) | |||||||||||||||||||
| EBITDAre | $ | 39,189 | $ | 42,313 | $ | 185,632 | $ | 168,365 | |||||||||||||||
| Reconciliation to Adjusted EBITDAre | |||||||||||||||||||||||
| Depreciation and amortization related to corporate assets | $ | (72) | $ | (86) | $ | (199) | $ | (249) | |||||||||||||||
|
Gain on insurance recoveries(1)
|
(1,101) | (900) | (1,649) | (2,347) | |||||||||||||||||||
| Amortization of share-based compensation expense | 3,257 | 2,543 | 10,462 | 11,115 | |||||||||||||||||||
| Non-cash ground rent and straight-line rent expense | 37 | (117) | 26 | (384) | |||||||||||||||||||
|
Other non-recurring expenses(2)
|
936 | 538 | 459 | 1,459 | |||||||||||||||||||
| Adjusted EBITDAre attributable to common stock and unit holders | $ | 42,246 | $ | 44,291 | $ | 194,731 | $ | 177,959 | |||||||||||||||
(1) During the three and nine months ended September 30, 2025, we recorded $1.1 million and $1.6 million, respectively, of insurance proceeds in excess of recognized losses related to casualty losses at certain properties. During the three and nine months ended September 30, 2024, the Company recorded $0.9 million and $2.3 million, respectively, of insurance proceeds in excess of recognized losses related to casualty losses at certain properties. These amounts are included in other income on the condensed consolidated statements of operations and comprehensive income (loss) for the periods then ended.
(2) Includes adjustments for pre-opening expenses, repair and clean up costs related to property damage and other non-recurring items.
The following is a reconciliation of net income (loss) to FFO and Adjusted FFO attributable to common stock and unit holders for the three and nine months ended September 30, 2025 and 2024 (in thousands):
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Net income (loss) | $ | (14,528) | $ | (7,433) | $ | 60,540 | $ | 17,647 | |||||||||||||||
| Adjustments: | |||||||||||||||||||||||
| Depreciation and amortization related to investment properties | 32,511 | 31,753 | 98,207 | 95,377 | |||||||||||||||||||
|
Impairment of investment properties
|
- | - | 279 | - | |||||||||||||||||||
| Gain on sale of investment properties | - | (1,628) | (39,953) | (1,628) | |||||||||||||||||||
| FFO attributable to common stock and unit holders | $ | 17,983 | $ | 22,692 | $ | 119,073 | $ | 111,396 | |||||||||||||||
| Reconciliation to Adjusted FFO | |||||||||||||||||||||||
|
Gain on insurance recoveries(1)
|
$ | (1,101) | $ | (900) | $ | (1,649) | $ | (2,347) | |||||||||||||||
|
Loan related costs, net of adjustment related to non-controlling interests(2)
|
1,070 | 1,358 | 3,277 | 4,073 | |||||||||||||||||||
|
Amortization of share-based compensation expense
|
3,257 | 2,543 | 10,462 | 11,115 | |||||||||||||||||||
| Non-cash ground rent and straight-line rent expense | 37 | (117) | 26 | (384) | |||||||||||||||||||
|
Other non-recurring expenses(3)
|
936 | 538 | 459 | 1,459 | |||||||||||||||||||
| Adjusted FFO attributable to common stock and unit holders | $ | 22,182 | $ | 26,114 | $ | 131,648 | $ | 125,312 | |||||||||||||||
(1) During the three and nine months ended September 30, 2025, we recorded $1.1 million and $1.6 million, respectively, of insurance proceeds in excess of recognized losses related to casualty losses at certain properties. During the three and nine months ended September 30, 2024, the Company recorded $0.9 million and $2.3 million, respectively, of insurance proceeds in excess of recognized losses related to casualty losses at certain properties. These amounts are included in other income on the condensed consolidated statements of operations and comprehensive income (loss) for the periods then ended.
(2) Loan related costs included amortization of debt premiums, discounts and deferred loan origination costs.
(3) Includes adjustments for pre-opening expenses, repair and clean up costs related to property damage and other non-recurring items.
Use and Limitations of Non-GAAP Financial Measures
EBITDA, EBITDAre, Adjusted EBITDAre, FFO, and Adjusted FFO do not represent cash generated from operating activities under GAAP and should not be considered as alternatives to net income or loss, operating profit, cash flows from operations or any other operating performance measure prescribed by GAAP. Although we present and use EBITDA, EBITDAre, Adjusted EBITDAre, FFO and Adjusted FFO because we believe they are useful to investors in evaluating and facilitating comparisons of our operating performance between periods and between REITs that report similar measures, the use of these non-GAAP measures has certain limitations as analytical tools. These non-GAAP financial measures are not measures of our liquidity, nor are they indicative of funds available to fund our cash needs, including our ability to fund capital expenditures, contractual commitments, working capital, service debt or make cash distributions. These measurements do not reflect cash expenditures for long-term assets and other items that we have incurred and will incur. These non-GAAP financial measures may include funds that may not be available for management's discretionary use due to functional requirements to conserve funds for capital expenditures, property acquisitions, and other commitments and uncertainties. These non-GAAP financial measures as presented may not be comparable to non-GAAP financial measures as calculated by other real estate companies.
We compensate for these limitations by separately considering the impact of these excluded items to the extent they are material to operating decisions or assessments of our operating performance. Our reconciliations to the most comparable GAAP financial measures, and our condensed consolidated statements of operations and comprehensive income (loss), include interest expense, and other excluded items, all of which should be considered when evaluating our performance, as well as the usefulness of our non-GAAP financial measures. These non-GAAP financial measures reflect additional ways of viewing our operations that we believe, when viewed with our GAAP results and the reconciliations to the corresponding GAAP financial measures, provide a more complete understanding of factors and trends affecting our business than could be obtained absent this disclosure. We strongly encourage investors to review our financial information in its entirety and not to rely on a single financial measure.
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities at the date of our financial statements and the reported amounts of revenues and expenses during the reporting period. Actual amounts may differ significantly from these estimates and assumptions. We evaluate our estimates, assumptions and judgments to confirm that they are reasonable and appropriate on an ongoing basis, based on information that is then available to us as well as our experience relating to various matters. All of our significant accounting policies, including certain critical accounting policies, are disclosed in our Annual Report on Form 10-K for the year ended December 31, 2024 and Note 2 in the accompanying condensed consolidated financial statements included herein.
Seasonality
Demand in the lodging industry is affected by recurring seasonal patterns, which are greatly influenced by overall economic cycles, the geographic locations of the hotels and the customer mix at the hotels.
Subsequent Events
In October 2025, the Operating Partnership entered into the First Amendment to Amended and Restated Credit Agreement, pursuant to which interest payable pursuant to the Amended and Restated Credit Agreement was reduced by removing the 0.10% credit spread adjustment to the term SOFR rate therein.
New Accounting Pronouncements Not Yet Implemented
See Note 2 in the accompanying condensed consolidated financial statements included herein for additional information related to recently issued accounting pronouncements.
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